The economy runs on expectations as much as anything else.
Try a little exercise : next time you are with a group of friends pull out a dollar bill and ask everyone how much it is worth. Some of them will say 100 cents. Some will think you are talking about inflation and say it is worth 30% of what a dollar bill was worth some odd years ago. All of these answers miss the point because not many people really think about what those dollar bills represent.
If that dollar bill is part of a transaction, say buying a candy bar, then that dollar bill is worth one candy bar. If, on the other hand, that dollar bill is combined with seven other dollar bills when you buy a ticket to go see the latest Hollywood blockbuster, then that dollar bill is worth 1/8 of a movie ticket.
In other words, a dollar bill is worth what you can get for it.
A dollar bill is just a thing. It has no intrinsic worth of its own. To ask what it is "worth" is a meaningless question unless you give it context. The context of a dollar bill's worth is the economy in which it is spent. The economy depends upon your faith that, if you want to buy something, the person who is selling it will accept the dollar bill in exchange for what they are selling.
But why do sellers accept these little pieces of paper? Because they know that everyone else will accept it. Any why will everyone else accept it? Because it is backed by the "full faith and credit" of the US government. In other words, the context which gives value to that dollar bill is the strength of the country that stands behind it. If the country is weak, the dollar bill will be weak. If the country is strong, the dollar bill will be strong.
Of course, economics is more complicated then this simple example, but ultimately it all comes down to the faith of those involved in a transaction that they are playing with something real.
All of this serves as background to something I have noticed about Republicans in the last several years : many of them either simply don't understand the concept of "worth", or, even worse, they understand it VERY well but want to play off on everyone's ignorance for their own benefit (and yes, there are lots of Democrats who don't understand it either, but I'll leave it to the good and loyal servants of Republican think tanks to knock them down).
Take for example the Gingrich Republicans.
You remember that fun bunch, don't you?
They were the ones who thought they could squeeze Bill Clinton by sending him temporary budget bills with poison pill amendments and then daring him to veto them and risk shutting down the government.
We all know how well that gambit worked!
But what got lost in all the wrangling during that period was another proposal from the GOP.
This was a proposal involving the national debt, which is all the money the U.S. Government has borrowed in the past and has promised to pay off in the future. The GOP proposal was that we save money on the interest on that debt by simply not paying it off.
But if you refuse to pay off your credit card debts, then you wouldn't be surprised if people refuse to loan you money in the future, right? Well, imagine the same thing, but on a national scale. These Republicans were essentially proposing the destruction of the "good faith and credit" of the U.S. government and with it the context that gives actual worth to those little pieces of paper in your pocket.
The monumental stupidity of such a proposal is breathtaking. Fortunately our country was spared the consequences of this ill-begotten suggestion. Unfortunately, the Republicans who proposed it suffered little for even making the suggesting.
So what does this have to do with George W. Bush, you ask?
Well, up until recently, I was under the impression that Dubya was of the same breed as the lunkheads who proposed defaulting on our debt. George has not proposed going that far (yet). But he and his pal Dick Cheney have, on multiple occasions, expressed concern about the possibility of our country going into a recession.
Now, I would expect these kind of comments BEFORE an election, when your opponent is the de facto incumbent whose single biggest weapon is an economy humming along at peak efficiency. But these nominal lunkheads have been making the same comments AFTER the votes have already been cast.
As I said previously, economies run on expectations as much as anything else. If people are feeling jittery about the economy then that may effect their spending habits and if enough people are effected by these jitters then that can have a real impact on the economy as a whole. When people feel jittery they turn to their leaders to hear what they have to say. The last thing they want to hear is confirmation of their worst fears.
Yet that is EXACTLY what George and Dick have been doing.
At first I thought they were just being typical Republican lunkheads. A leader doesn't say we might be going into a recession. A leader talks optimistically about our ability to AVOID going into a recession. This way he can honestly acknowledge the worries while at the same time calming people's fears and stemming off a potential death spiral.
I chalked the comments of George and Dick up to their just not being good leaders. But then I heard about comments Dubya made in the current issue of Time magazine (the "Person Of The Year" issue) in which he said that his gargantuan tax cut proposal was essentially non-negotiable. He said that he viewed it as an insurance policy against a possible economic downturn.
It was then that it all became clear to me. A leader who wants to avoid a recession would reassure people that a recession could be avoided. But a leader who WANTED a recession would talk about it as if it were virtually guaranteed to happen.
But why would Dubya and his cohorts WANT a recession?
He's a politician after all, and politicians worry about getting re-elected -- and, at least according to conventional wisdom, a recession can hurt his chances of re-election (indeed, some Democrats have secretly been gleeful about the prospect of Dubya suffering from a long overdue economic correction).
But what if the Republican agenda's highest priority is not re-electing Bush?
Consider this : Ronald Reagan, the last Republican President who pushed through this kind of massive tax cut, had the advantage of coming to power during a particularly low point in our nation's economic history. When the economy is running on empty there is a certain logic to giving it the kind of adrenaline boost that comes with a large tax cut. But when the economy is running well, which it currently is (even despite recent negative warning signs), the general thinking is that a tax cut can put the economy into overdrive and, to stretch the analogy, strip its gears. Over-stimulate the economy with tax cuts and you may encourage inflation, which will encourage Alan Greenspan to raise interest rates, which will increase unemployment. All-in-all its a proposal that doesn't make much sense.
So how are Republicans to sell a huge tax cut when it isn't needed? By creating the impression that it is! And how do you do that? By talking as if a recession were a sure thing! Even if such talk leads to a recession it doesn't matter because that just gives even greater incentive for passing the tax cut (also known, euphemistically, as an "economic stimulus package").
And if you can push through the huge tax cuts you can return us to the days of Reagan size deficits, deficits that had the pleasant benefit (if you are a Republican) of sucking up all the money Democrats want to spend on programs that appeal to their constituents.
The program then is simple :
Reap the majority of the benefit of that tax cut ("What, the workers actually expected to get something from this? How funny!").
Trash the ability of the government to sponsor progressive programs.
Huzzah! The best of all possible worlds!
Don't be fooled into thinking that a recession (or even a depression) is a negative for the Republicans. They couldn't care less about it one way or the other. They can always fool the voters again in four years into thinking that the only reason the recession happened was because of Democratic roadblocks to Dubya's wonderful tax program. And if that doesn't work they can just steal it again.
Politics, you see, is also a game of expectations.
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